David Booth’s Dimensional Advisors hasn’t been a part of the active ETF market for long in fact just a meager 14 months, but that hasn’t stopped it from rising to the top of the active market. Since last November they have rocketed to over $46 billion in active assets. Overall active management is growing rapidly and going to be a trillion-dollar trend of converting mutuals to ETF’s. However, Dimensional’s newly launched active fixed-income is flying off the shelves with nearly $1 billion in assets since their inception in November. While the lion’s share has been converted, this fixed-income segment is among some of the fastest pure growth in the fixed income ETF market.

FINSUM: Within the ETF segment, active ETFs have been growing strongly, and this is at the forefront of a new trend.

Goldman and many other Forecasters have upped their projections for the number of rate hikes in 2022, but most are calling for a timid four in order for the fed to better combat inflation. CEO of JPMorgan Dimon, however, sees a much more aggressive Fed. Dimon says the Fed will hike rates six or seven times in 2022, which would bring the baseline FFR up to a whopping 2%. Dimon says 200 basis points used to be an overnight adventure for the Fed during the Volcker administration. Despite these wildly hawkish projections Dimon still sees the fed threading the needle and maintaining a balanced growth path while fighting inflation. Others called Dimon’s projections irresponsible and said the market would suffer greatly for hikes that severe.

FINSUM: There is no way the Fed could hike rates 2% in 2022 and maintain a balanced growth path, however, the Powell Fed bringing inflation back down and not taking the economy is still the most likely outcome, just not under seven rate hikes.

Exchange-traded funds focusing on environmental, social and governance themes have been one of the fastest-growing market segments in a couple of years, but so far have yet to reach the acceleration in Asia as they have in the U.S. and EU, until now. The most recent data from the Asian Pacific has more than 1.5x as many funds starting in the first half of 2021 than all of 2020. The asset flows are even more staggering. Inflows since in the first half of 2021 are 10x larger than all of 2016, and they have almost already reached 2020’s $2bn. The standout countries are Australie, China, and Taiwan which comprise over 85% of all the ESG ETF assets. Moreover, these trends are expected to continue with more advantages on transparency and liquidity than other market segments.

FINSUM: These are astounding numbers for ESG growth, and faster-growing economies might not have the incoming restrictions to ESG the US could be facing.

Active funds get overlooked by many investors in their retirement portfolios because investors view them with a certain amount of risk aversion. However, rising inflation and positive income expectation make them a viable investment alternative. For global diversity, investors should consider SPDR SSgA Global Allocation ETF and the Invesco Optimum Yield Diversified Commodity Strategy No K-1 ETF which have unique exposures. For those wanting to maintain fixed income exposure but better yield, First Trust Low Duration Opportunities ETF and First Trust Prefered Securities Income ETF are both debt-focused funds that are great for retirement. Active ETFs have a fee advantage over the often considered mutual funds.

FINSUM: These are great alternatives given the pending interest rate and inflation risk that are both permeating bond markets.

AQR is one of the leading quant funds, and they had a difficult 2021, but they are bouncing back big with a new idea in ESG. Their new Sustainable Long-Short Equity Carbon Aware Fund will pick U.S. and foreign equity on a variety of ESG criteria with a net-zero carbon emissions target, but it will also short funds that aren’t meeting ESG standards. Most funds have stayed only on the positive end of things but CEO Cliff Asness believes shorts selling is a key tool that can be leveraged to reduce carbon emissions. Asness will be a portfolio manager on the funds, and his unique perspective on ESG will be critical in how the fund performs in the upcoming years.

FINSUM: Value quant funds like ESG suffered the last two years relative to the market but so far in 2021 AQR has seen huge inflows and its ESG strategy is part of that.